Lord Garnier: My Lords, I thank my noble friend the Minister for his opening remarks and for the advance that the Government have made on two fronts. The first is by clarifying the senior management officers within a company; in doing so, they have clarified the way in which the identification doctrine can be applied in modern Britain.
As I have said on previous occasions, I have an interest to declare. I will not specifically recite it again because I did so in Committee, at Second Reading and, I think, on the three or four previous pieces of legislation into which a failure to prevent amendment  could have been inserted—but of course it was not the right Bill, the right vehicle or the right time, and in fact it was just not right. So here I am again.
I shall speak to my Amendments 110 and 125A, which at the appropriate time I will move to a Division unless the Government persuade me otherwise. I am not engaging here in party politics or even in a rebellion. I am doing nothing by surprise; anyone who has followed discussions on economic crime over the last 13 years will know precisely what I am going to say. Indeed, my noble friend the Minister is adept at moving from one corridor to the next to avoid having a yet further conversation with me about my favourite subject. He has also heard all my jokes before, but not every Member of our House has had that advantage so it may be that, unless the Government accept my amendment, my little Aunt Sally will have another canter around the course. However, I will take things in stages.
First, I thank the Government, as I hope I have done —and I mean it sincerely—for their Amendments 104 to 106 and 109—essentially, the modernisation of the identification principle, so far as it goes. We are now slowly catching up with the Americans; they did something similar to this in 1912, but this is the United Kingdom and we must not rush.
That said, I think this is an advance but, in welcoming the advance from the Government through my noble friend the Minister, we must recognise the distinction between the identification principle and the amendment that the Government are bringing forward, which enables people lower down the corporate hierarchy to bring liability for criminal activities to the company. That is to be distinguished from the failure to prevent regime, which is where the company is made liable for failing to prevent offences committed by its associates or other employees, sometimes overseas. The government amendments on the identification principle do not have any bearing on extraterritorial crimes. Fraud committed overseas would not be bitten by the identification amendments; welcome as they are, they are limited to offences committed within this jurisdiction. I repeat: I am delighted that they have moved that far.
I will not take too much time because everyone has heard all this before, or at least those who are interested have. I thank the Minister for what he has said in relation to the identification principle and all those Members of this House who have, both in Committee and at Second Reading, indicated an interest in, and spoken with great knowledge and experience about, the need to expand the failure to prevent regime.
The two amendments that concern me particularly are Amendments 110 and 125A. I will take them in reverse order. Amendment 125A—which I see that the noble Baroness, Lady Bennett, has kindly co-signed, although she is not the only noble Lord who supports the principle of what I am advocating—would see a modest increase in the ambit of the failure to prevent regime. I have some much more exciting amendments, which I shall not be moving, which would increase the ambit of that regime from beyond the Section 7 offence under the Bribery Act 2010, beyond the facilitation of tax offences in the Criminal Finances Act 2017 and  well beyond what is under discussion now. I have amendments that, for example, would cut and paste the offences listed in the schedule to the Crime and Courts Act so that a whole host of financial offences would be added.
To borrow part of the Rolling Stones speech by the noble Lord, Lord Cromwell, and to bowdlerise it and mess it up, I am going to do what I can and grab what I can rather than going to the very limits of what I think is possible and indeed right. I will limit my desire to extend the regime to cover the fraud offences that the Government suggest and to add money laundering.
The Government say there is no point adding money laundering because it is all covered by regulations. I have two points about that. First, if we are to extend the criminal law, we should do so by primary legislation. Secondly, the regulations do not cover the situations that I am seeking to encourage our jurisdiction to prevent. The 2017 anti-money laundering regulations are fine so far as they go. They set out a list of obligations that financial services advisers and so on need to comply with. That is to be distinguished from the offences under the Proceeds of Crime Act 2002, where the criminal offences of money laundering are set out.
If the Government seek to persuade your Lordships that the regulations do the trick, they do not; they miss the point entirely. They deal with something completely other than what I am talking about, which is failure to prevent those POCA offences being committed by associates of those companies. It is a much more serious set of circumstances, which are not dealt with or catered for by the regulations from 2017. That is the argument for Amendment 125A.
Amendment 110 is supported by a number of my noble friends and other noble Lords, for which I am most grateful. It is to the part of the Bill which deals with large organisations: Clause 188. The Bill as drafted states:
“A relevant body which is a large organisation is guilty of an offence if, in a financial year of the body … a person who is associated with the body … commits a fraud offence intending to benefit …the relevant body”,
and so on. Only a moment’s examination of the Government’s definition of a large organisation would demonstrate to this House that that is absurd. Essentially, the Government are saying that the whole of the corporate economy and partnership economy in this jurisdiction, but for 0.5% of it, constitutes an SME.
The failure to prevent fraud offence—and, I would say, the failure to prevent fraud and money laundering offences—will not, if the Government have their way, bite on 99.5% of the corporate and partnership economy. Here, my noble friend the Minister will block his ears. That is the equivalent of us saying that every burglar over six feet, six inches is liable to be prosecuted, if the evidence and public interest dictate, but every burglar under that height gets off scot free. If that is what the criminal law should be—and this House is free to say so—that is a strange thing. I would even say it is a ridiculous thing. I would say it is a laughable thing. If we want to be taken seriously as a jurisdiction which is bearing down on dishonest business, we should not accede to the Government’s blandishments.
One of the reasons why they say it would be unfair on the corporate world to do away with the “SME” exemption—I put SME in inverted commas here, because it is not the right description for 99.5% of the corporate and partnership economy—is that it would place a vast financial burden on business. My noble friend said as much just a moment ago. Is it not interesting that the SME exemption does not appear in the Bribery Act or the Criminal Finances Act? I have not heard a good answer to the question why it did not, nor to the question why the SME exemption is so marvellous for this Bill. There may be one, but we have not heard it.
Let us take advice not from me, but from experienced accountants and academics. I am thinking particularly of a member of RUSI, Kathryn Westmore, who has written about and studied corporate criminal liability quite considerably, both from within the accountancy firm EY and now at RUSI. The assertions, made without evidence, by the Government that this is going to cost corporate Britain billions of pounds are not made out. Much of the corporate world already, for good business reasons, makes sure that they are not putting themselves at risk of committing economic crimes. They have auditing requirements and reasons of self-interest, to protect their reputations and so on.
The argument that this is going to cost a lot of money, if it was going to run, would have run in 2010 and 2017. It did not run then; nobody made that argument and if they did, it did not last. The Government certainly did not make it, and that argument is not going to run today. I urge the House not to be persuaded by the SME exemption—that 99.5% of the economy relevant to this Bill should be freed from the liability to behave properly.
I have said all of this so many times before that I no longer need to say it again; but I have. I have now finished. I may well be saying the same thing next year, but I hope not. If I do, please bear in mind that you will not be hearing it for the first time.